Asymmetric Effect Of Inflation On Agricultural Output In Selected West African Countries

Abstract

The dominant empirical tradition linking inflation to agricultural performance in West Africa rests on a linear assumption that a rise and an equivalent fall in prices move agricultural output by the same amount, in opposite directions. This assumption sits uneasily beside the structural realities of a region whose agriculture is overwhelmingly rain fed, smallholder, and thinly integrated into storage, credit and distribution networks. This study tests whether that linear assumption holds by decomposing consumer goods inflation (CPI) and producer goods inflation (PPI) into positive and negative partial sums and estimating their asymmetric long run and short run effects on agricultural output in six West African economies (Nigeria, Ghana, Cote d’Ivoire, Senegal, Burkina Faso and The Gambia) from 2000 to 2024. Annual panel data drawn from the World Bank, FAO and ILO databases were tested for cross sectional dependence, second generation unit root properties and panel cointegration before being estimated with a Pooled Mean Group Nonlinear Autoregressive Distributed Lag (PMGNARDL) model. The results show that both rising and falling consumer prices significantly depress agricultural output, with the depressive effect of falling prices roughly three times larger than that of rising prices, while both rising and falling producer prices significantly raise output, with falling producer prices exerting the stronger effect. Long run and short run Wald tests confirm asymmetries are statistically significant, rejecting the symmetry restriction. Credit to agriculture and exchange rate movements emerge as powerful long run conditioning variables. The study concludes that inflation transmission to West African agriculture is structurally asymmetric and recommends volatility targeted monetary policy, expanded storage and agro processing infrastructure, and de risked agricultural credit as complements to conventional price stability objectives.